Entrepreneur package and lifting of restrictions

Bill L71, amending the Companies Act, proposes reducing the capital requirement for private limited companies from DKK 40,000 to DKK 20,000. The bill also allows private limited companies - under certain restrictions - to offer the company's shares to the public. This has previously been prohibited.

Bill L72 proposes to repeal the conditions for shareholder loans in the Companies Act. The bill also proposes that the rules of the Financial Statements Act on reporting target figures for the underrepresented gender be repealed. In this connection, we refer to our article on the proposed Gender Balance Act, which can be accessed here.

Reduced capital requirement for private limited companies

L71 proposes to reduce the capital requirement for private limited companies by 50 %, from DKK 40,000 to DKK 20,000.

Denmark has so far had one of the highest capital requirements in the EU for private limited companies and similar companies. The capital requirement for private limited companies is proposed to be changed to reduce the barriers to entry for entrepreneurs and make it easier to run a business in a limited liability company form.

The Minister for Industry, Business and Financial Affairs will determine the exact date when the amendment takes effect.

Public offering of shares

The bill also proposes that private limited companies should be able to offer their shares to the public when the total value of the company's offering is less than EUR 5 million calculated over a period of 12 months or if the company's offering fulfils one of the following conditions:

• The offering is aimed exclusively at qualified investors.
• The offering is aimed at fewer than 150 natural or legal persons (who are not qualified investors) per EU/EEA country where the shares are offered.
• Shares in the offering have a nominal value of at least EUR 100,000.
• Each investor acquires shares for at least EUR 100,000 in each offering.

The proposal means that private limited companies can offer the company's shares to an unspecified group, e.g. via the company's website, by placing adverts in various media or via a crowdfunding platform. The opportunity for private limited companies to offer their shares to the public must apply both when the company is established and as part of capital increases. The aim is to make it easier for more entrepreneurs to raise capital, including enjoying the benefits of operating as a limited liability company.

The bill does not allow private limited companies to offer their shares via a regulated market or a multilateral trading facility - this option will remain reserved for public limited companies.

The change is expected to take effect on 1 January 2025.

Easier access to shareholder loans

L72 proposes to abolish the Companies Act's conditions for shareholder loans that go beyond the requirements of the EU Company Law Directive from 2017. The aim is to ensure greater flexibility for companies to run their business as they wish.

If the bill is adopted, there will no longer be a requirement for the loan amount to be available within the company's distributable reserves; that the decision to grant shareholder loans is made by the general meeting; and that such a decision is only made after the presentation of the company's first annual report.

However, the granting of shareholder loans will have to take place within the other rules of the Companies Act.

The management of the company, which, if the amendment is adopted, will be able to make a decision to grant shareholder loans, must therefore consider, among other things, whether:

• the company has sound capital resources and continuously assess this;
• a loan does not manifestly confer an undue advantage on one shareholder at the expense of the other shareholders;
• the restrictions of the Companies Act in relation to self-financing are complied with.

The bill does not change the tax treatment of shareholder loans. This means, among other things, that shareholder loans from a subsidiary to the parent company must continue to be made on arm's length terms, and that shareholder loans granted to natural persons with a controlling interest in the company are generally taxed as salary or dividends.

The change is expected to take effect on 1 January 2025.

Reporting on targets for the underrepresented gender

The bill also proposes to repeal the Financial Statements Act's rules on reporting target figures for the underrepresented gender in the company's annual report.

Denmark has long had rules on setting and reporting targets and policies for the underrepresented gender. The rules on setting targets are found in the Companies Act, so it is only the reporting obligation in the annual report that is proposed to be repealed.

The repeal is not intended to weaken the fight for gender equality, as large companies still have to set targets and policies for the underrepresented gender.
However, the Financial Statements Act's reporting obligation is a national provision that partially overlaps with the extensive EU regulation that has been adopted in this area in recent years. This includes the implementation of CSRD, which requires large companies to include gender balance and diversity in senior management as part of their sustainability reporting.

In relation to the proposed change, please refer to our article on CSRD, which can be accessed here, and our article on the proposed Gender Balance Act, which can be accessed here.

The change is expected to be effective for financial years beginning on or after 1 January 2024.